Women’s roles on boards of directors and in executive officer positions has been an important topic of discussion in Canada and globally as well over several years. Recently, steps have been taken to require more disclosure and information from certain larger public companies based in Canada. This is to give potential investors more information about the gender diversity practices and policies of these corporations before deciding to invest.

As more fully described below, non-venture issuers (this would not include issuers listed on the TSX Venture Exchange) are required to “comply or explain” under the regulatory regime. To date, certain disclosures by non-venture issuers in their management proxy circulars remain inadequate. This will continue to be an area of focus for securities regulatory authorities so non-venture issuers need to review the requirements and ensure they are in compliance.

In Canada

On December 31, 2014, the securities regulatory authorities in Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Québec, Saskatchewan (collectively, the “Participating Jurisdictions”) implemented Rule Amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices (NI 58-101).

Under the amendments, non-venture issuers must disclose, on an annual basis, usually in the issuer’s management proxy circular:

• the number and percentage of women on the issuer’s board of directors and in executive officer positions;
• director term limits or other mechanisms of board renewal;
• policies relating to the identification and nomination of women directors;
• consideration of the representation of women in the director identification and nomination process and in executive officer appointments; and
• targets for women on boards and in executive officer positions.

The Rule Amendments require that if a non-venture issuer has not adopted the above mechanisms, policies, or targets or does not consider the representation of women, it is required to explain its reasons for not doing so, which is typically referred to as a “Comply or Explain” approach. The stated purpose of the Rule Amendments is to increase transparency for investors and other stakeholders and as a result, assist investors when making investment and voting decisions.

On September 28, 2015, CSA Multilateral Staff Notice 58-307 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices was released (the “CSA Review”).

Canadian adoption rates vary by industry

As of June 2, 2015, there were 886 reporting issuers listed on the Toronto Stock Exchange (TSX) and subject to Rule Amendments. Of these, 722 non-venture issuers were reviewed for their compliance and disclosure related to the Rule Amendments. The following statistics were identified among the 722 issuers:

• 49% have at least one woman on their board;
• 60% have at least one woman in an executive officer position;
• 15% have added one or more women to their board this year (not necessarily as a result of the Rule Amendments); and
• 19% have adopted director term limits, while 56% have adopted other mechanisms of board renewal.
• 14% disclosed the adoption of a written policy relating to the identification and nomination of women directors and related details of the policy and 65% disclosed that they had decided not to adopt a written policy.

Overall, the policy adoption rate was consistent across the country, but varied considerably by industry. The insurance, utility, communications and entertainment industries had the highest policy adoption rates at roughly 30%, while the oil and gas, technology, biotech, hospitality and environmental industries had the lowest rates, at less than 10%.

Set out below are a few tables taken from the CSA Review which help to show the participation of percentages and number of women on boards and executive officer positions by various industries.

The CSA Review concluded that a number of non-venture issuers had non-compliant and incomplete disclosure, as required by the Rule Amendments. In some instances, non-venture issuers appeared not to be aware of the requirements under NI 58-101 and had omitted disclosure. Examples of what the securities regulatory authorities consider to be appropriate disclosure, to allow investors to make informed decisions, were included in the CSA Review.

This remains an area of interest to the securities regulatory authorities and particularly to the Ontario Securities Commission (OSC), where Maureen Jensen was recently appointed Chair and Chief Executive Officer. Prior to her appointment, she led the initiative by the OSC on these disclosure initiatives.

Some global initiatives

In 2010, the U.S. Securities and Exchange Commission (SEC) amended its corporate governance disclosure rules to require companies to disclose how they incorporate diversity when searching for new board members.

Specifically, the SEC requires public companies to disclose if they consider diversity when searching for a new board member, how a company uses diversity when considering candidates, and if they have a policy that specifically addresses the consideration of diversity when searching for board candidates. However, neither the New York Stock Exchange (NYSE) nor NASDAQ has included any gender diversity requirements in their listing requirements.

In Australia, companies listed on the Australia Securities Exchange (ASX) must “comply or explain” whether gender objectives have been set by their boards and their progress against these objectives, if objectives have been set, and the proportion of women on the board in senior management roles.

Since September 2013, the Hong Kong Stock Exchange Corporate Governance Code requires the board of each listed company on that exchange to disclose whether it has adopted a diversity policy, and if not, to explain why. Companies that have adopted a policy must summarize the policy and the progress that has been made toward the objectives.

Conclusions

There is progress being made in terms of regulation and policy that require and encourage the disclosure and inclusion of women on boards and in executive officer positions. Greater gender diversity can lead to improved governance, new approaches and in some cases an improved bottom line for companies. Shareholders and other stakeholders in public and private companies are also taking an active role in requesting that boards and executive officers be more reflective of the gender diversity in the population. However, these issues must continue to be actively pursued by regulators, companies and stakeholders so that further progress can be made in the future.